The firm lowered its price target for the Bethesda, MD-based company to $19.75 from $20.25 based on valuation, TheFly reports.
Keefe Bruyette expressed concern over several other REITs, such as Annaly Capital Management (NLY), and highlighted Two Harbors Investment (TWO) as a favorite stock that's undervalued, the firm said in an analyst note, according to Barron's.
American Capital Agency and Annaly Capital Management are likely to continue benefiting "simply from investor demand for yield," Keefe Bruyette continued. Analysts expect REITs to keep trading below book value.
"This partially reflects concerns about the stability of earnings because of prepayments and book value, but we think it also reflects investor caution about the business model," Keefe Bruyette noted.
American Capital Agency is expected to report its fiscal 2016 second quarter earnings next Wednesday after markets close.
Shares of American Capital Agency closed up at 1.09% to $19.42 on Tuesday.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate AMERICAN CAPITAL AGENCY CORP as a Sell with a ratings score of D. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity and weak operating cash flow.
You can view the full analysis from the report here: AGNC